Seaside 'buy-to-lets' offering 8 per cent rental yieldPosted on: 01 July 2013 by Ronan Marrion
Ronan Marrion examines why seaside property is providing the best return for 'buy to let' investors
It was interesting to read that around 20 of the UK’s leading scientists and meteorologists are due to meet to discuss Britain’s ‘unusual’ weather patterns.
They are aiming to identify the factors that could have caused the cold winter of 2010-11, last year’s long, wet summer, and why spring this year was the coldest for 50 years.
Despite the best efforts of the UK’s weather many people are choosing to live in the country’s seaside towns, which are providing the best returns for investors.
A recent report by HSBC, which looked at the 50 towns and cities with the highest concentration of private housing rental stock, found that landlords in Southampton, Blackpool and Kingston-upon-Hull are achieving typical rental yields of almost 8% on their buy-to-let properties.
Closer to home the Isle of Scilly came in at number eight on the top 10 of seaside buy-to-let hotspots with an average property price of £180,227, an average monthly rent of £654 and a gross rental yield of 4.35%. *
At number four in the seaside top ten is Torbay, which has an average property price of £139,168, an average monthly rent of around £650, and a gross rental yield of 5.16%.
Slightly away from the sea, but still fairly close, we’re noticing particularly strong yields in Truro compared to other areas of Cornwall, such as St Ives.
Truro as the county capital is seeing a lot of investment and growth at the moment. The high number of professional firms in the city and the expansion at the Royal Cornwall Hospital mean that rental properties are in high demand.
When you have a quick glance on current interest rates its easy to see why more investors are looking for buy-to-let opportunities, especially as 23 of the top 50 areas in the HSBC survey are offering yields above 5%.
This is significantly more than traditional savings options and is being reflected in the calls we are receiving here at Worldwide.
Another interesting aspect of the report highlights that there is a fine line between property in a desirable area, the rents that can be achieved and the returns.
London didn’t make the top 10 as the high property prices mean yields are lacking compared to areas where there is a ready supply of affordable housing, such as Southampton, which tops the list.
So, what are the reasons behind the interest in buy-to-let mortgages?
Three key considerations for 'buy to let' properties:
- Whatever is happening in the property market or what people are saying about what will happen, you will always get people who want to have a tangible investment, like good old bricks and mortar. Owning a second or third or even fourth property gives this group of people a sense of security in that no mater what happens in the investment market, for example, they will always have something physical that they can see or touch. And for a number of investors that can be reassuring.
- As we hear about in the news on a regular basis it is still proving to be difficult for people to access residential mortgages to get on the property ladder. Even though property prices have dropped, it can be hard for people to save enough for the deposit. What this means is that there is a higher demand for rental properties from those people unable to get residential mortgages, which leads to an opportunity for people who are able to access funding.
- Falling property prices have also created a new group of investors – people who want to sell their home and move, but not at the prices that are being suggested by estate agents or offered by would be buyers. In order for these people to move to their next abode many of them are remortgaging their existing home as a buy-to-let to free up capital, which they can use as a deposit for their new property.
And it’s not just professional investors who are utilising these options to help them see yields of 5% or more. All sorts of people are doing this now. (2)
They think property prices are low and that they will get a better return than with a pension or savings. And combined with the fact the cost of borrowing is low and mortgages are more competitive, these factors have all come together to create the increase in the buy-to-let market.
Many of them hope to make hay while the sun shines.
That is of course, if the scientists and meteorologists ever think it will happen again.
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